Federal court keeps Louis DeNaples off FNCB board

A federal appeals court on Thursday refused to block an order from bank regulators directing Dunmore auto parts and landfill magnate Louis A. DeNaples to resign from the board of First National Community Bancorp Inc. and sell his controlling interest in the bank.

A federal appeals court on Thursday refused to block an order from bank regulators directing Dunmore auto parts and landfill magnate Louis A. DeNaples to resign from the board of First National Community Bancorp Inc. and sell his controlling interest in the bank.

There was no indication Thursday evening that DeNaples had tendered his resignation or pursued further appeals.

His attorneys had identified Thursday as the deadline for resignation set by the Board of Governors of the Federal Reserve System.

An official with the Dunmore-based bank said that, to his knowledge, no letter of resignation had been submitted to the bank board.

The ruling issued came from a three-judge panel of the U.S. Court of Appeals for the District of Columbia, which is considering DeNaples' appeal of the Federal Reserve order.

On April 10, the Federal Reserve Board gave DeNaples 30 days to resign, concluding that his 2009 agreement with Dauphin County prosecutors, which led to the withdrawal of perjury charges, made him ineligible to serve on a bank board or hold a controlling interest in a bank.

The board gave DeNaples 60 days to present a plan to sell enough stock so that he and relatives and business associates who also own shares in the bank and might work in concert with him would no longer hold a controlling interest — defined as 10 to 25 percent by federal bank rules, depending on several variables.

DeNaples, 71, owns 10.26 percent of the publicly traded voting stock of First National Community Bancorp and is a member of a group that holds 19.87 percent of the voting stock, according to the Fed order.

The order also directed DeNaples to divest his controlling interest in a privately held bank-holding company in Connecticut, Urban Financial Group Inc. DeNaples owns 45 percent of that company's stock, according to the Fed.

The order could prove costly for DeNaples and other owners of shares in First National Community Bancorp, which have plummeted in value from above $22 in 2007 to $3.50 per share Thursday.

The bank reported losses of $46 million in 2009 and the first half of 2010 and is subject to close supervision by the Office of the Comptroller of the Currency under a consent decree it signed in 2010.

DeNaples, who reported income of $63 million in 2003-2005, according to tax returns attached to a civil suit unrelated to the bank, bought thousands of shares at $12 to $16 as late as 2008, U.S. Securities and Exchange Commission records indicate.

Dumping a sizable portion of DeNaples' 1.6 million shares on the market could further depress the stock price, according to Bert Ely, an independent bank analyst in Arlington, Va.

The Fed, under the terms of its order, could allow DeNaples and associates who might be forced to sell stock to place their holdings in a trust to be sold over time, he said.

"I can't see the Fed screwing the other stockholders by having a fire sale on the stock," Ely said. "They should be judicious here on how the stock is sold."